eEnergy Group Plc (A1Z1.F) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the eEnergy Group Plc investor presentation. Throughout out this recorded presentation, investors will be in listen-only mode. [Operator Instructions]. I would now like to hand over to the executive management team from eEnergy Group Plc, Harvey.

Good morning, and welcome to our end of the year trading update. So overall, I'm very pleased with the progress the company has made in the last 12 months. It was frustrating to see that we had just over GBP 4 million delayed that we were expecting to recognize in FY '25. However, as I explain in the presentation today, the underlying value has not been eroded. And in fact, if we take a broader regarding 90-day look of the business, we can see that those contracts did close and did sign before the end of the year and has supported a forward order book that we're very proud of as we get into FY '26. So overall, a strong EBITDA performance, which was up 183%, which demonstrates good solid organic growth. We have very strong visibility now over a contract forward order book that's over double than it was this time last year and evidence of an investment-grade pipeline GBP 127 million which has been originated and developed and heavily invested in over the course of the last year. Underpinning all of this growth is evidence really as a strategy that's now firmly working that we stated just over 2 years ago, which was a move away from direct sales and into partner-led, framework-led and diversification of routes to market. And you can see that through some very large awards being secured this year, not least the government contracts with GB Energy, but also with the NHS NEEF Awards and the local authority award all of which were materially underpinning the growth strategy that we now feel are entrenched in our business. It's evidence that large institutions, government and private confident in the energy's ability to deliver large multisite projects, evidence that we have got a multi-technology driven strategy that's giving confidence across energy efficiency, renewables in a number of different forms, and now increasingly a growing battery storage business with a rapid EV on those projects. So this is a big stepping point of the business. We've got way more visibility. We've got 3 to 6 months visibility now in our pipeline. We're much less reliant on direct sales, which is a more unpredictable project-based revenue line. We have an underlying engine, but now we've got the support of multiple revenue lines. Margins have been maintained at a strong level, as John will talk to you about. We've underpinned a very strong and organically growing multi-service proposition in renewables, and I'll talk about it in a minute. But also we build to recur revenue lines with our satellite proposition. We've now got a total order book of over GBP 2 million, which is delivering GBP 200,000 of recurring revenue from this year. So that's not in our order book. So overall, a huge number of accomplishments, and I'll go into some of those in a bit more detail in a minute. And finally, it was great to invite Nick Mills to join us a non-executive Board Director to replace John Hornby, who would like to thank his support over the last 3 years. He's been a great non-exec, but Nick brings a huge amount of very relevant experience as we move in to the next chapter of our growth. I thought I would just frame how eEnergy is evolved, not from a product proposition perspective, but from a sort of structural operating platform. So we see our businesses 2 very distinct parts. We have a commercial development platform, which is all around the origination and underwriting and structuring of energy performance contracts whether that's energy efficiency, ground solar, solar carports, battery storage or EV. It's all around our ability to originate deals through multiple channels, create investment-grade funded proposals, which revolve around very accurate and trusted assessment of projects and being able to essentially convert those at pace and at scale. We've got a very, very efficient development engine and it runs on across all parts of our business. I think this is one of the underlying value propositions of our business model is that we can add scale. We think there is a huge amount in technology to help this process. So with third-party integration, the middleware systems, Microsoft all the way through to proprietary apps that allow us to be fully integrated and move differently in this environment than our competitors as evidenced by the conversion rate, and we generally see a 50% conversion at from proposal to sale throughout the sales cycle. And then the second part of our business, which has evolved and matured a lot over the last 12 months is our EPC delivery platform, originating originally from an energy efficiency background. We're now fully integrated with very experienced delivery platform across the renewable space, which include batteries and also and our 2 Chief Operating Officers, are very skilled and have run very large teams in their previous roles before they joined eEnergy and have been instrumental in building out our operating platforms for growth. And we've got a team now that has the capacity to recur or GBP 70 million, GBP 80 million of revenue between them. So we've fill in anticipation over the next 2 years' worth of scale and growth. Margins within the EPC delivery platform are very stable. In the LED space, we're consistently hitting over 40% gross margin. And in the solar environment, we are constantly hitting 30% gross margin. So we think this is a real testament to our operating model. And we think that's going to help create a really strong gearing effect in our EBITDA margins as we start scaling our revenue. As you see from this proposition, I guess, graph, you can see how battery storage is now a key part. This is a really interesting growth area and I think underpins the next 5 years of our strategy. We've got over 1,300 customers under contract now, all of whom are a perfect hunting ground for integrated battery storage and that's a very exciting growth strategy for us. You also see here, we've added a fourth pillar in terms of our target sectors. Education was our core, and we were effectively 5 years here, a direct sales organization targeting schools. That is now integrated into a fully multichannel education business across higher education, universities and colleges, both in the private and public sector, and we're proud to be renowned as the #1 player in the education market and the addressable market in this space is huge. It's still over 55% addressable market. We've got large multi site government-backed projects, which are a new revenue stream for us in addition to our traditional risk to market. Health care is probably our strongest growth new business area. And in the last 12 months, we've underpinned a fantastic number of case studies. We've got huge pipeline building, again, a very large addressable market for energy efficiency, but some really interesting opportunities coming through the health care space. Recently signing the first of its kind of balance sheet energy performance contract with the number of GP surgeries using the new adaptive off balance sheet approved funding mechanism. We're able to guarantee savings for our customers. Again, a unique pivotal product with only people in the market that can offer a true balance sheet IFRS 16 contract. And we believe that the appetite in the NHS in particular for this product is extremely large for us. Commercial industrial, landlord focused for solar is a big part of our market now. We're working a lot with the REITs and with the multistate portfolio managers. Huge landlords looking to increase the valuations of their portfolios by adding solar and batteries to their estate and we're starting to get great case studies in that area. And then Sports and Leisure over the last 2 years, we've built a great case study portfolio of everything from golf clubs to paddle courts to leisure centers to pools to indoor kind of snow center environment. So we think this is a really interesting to the super niche, and we're starting to build a pipeline in here on the back of those case studies in some very fast-growing markets. Just a few images, I thought investors would like to see in some of our big 2025 projects. Brioche is very, very pivotal grand solar solution here, GBP 1.5 million contract value. Great stepping off point for other future carports, which we see as a big market for us. Complex outdoor Snow Center, green roof, a very complex environment to put solar on to. GP 1.5 million contract successfully delivered opening up the doors to future more complex projects. Big rollout achieved last year. It was a 9-month rollout program, which started in 2024, completed last year, very proud of where we did complicated estate complicated buildings enabled us to win quite a few other complex jobs on the back of it and a pivot into the health care environment. So just summarize some key achievements. I think that the switch from single direct sales channel route to market into a multisector, multichannel, multi-tech route to market has been pivotal for us. Frameworks and the success of getting on very much which are both closed and open have enabled us to build a very credible pipeline within new environments. The renewable space has been a big turning point for us as we move not just into roof mount, but also ground mount and car port moved away from small projects and very some very large multisite and large singular site projects and 100-kilowatt allot to 5-megawatt projects. Wrapping all of this has been the successful closing of the GBP 100 million facility with Redaptive, which supports the NatWest facility, offering a number of unique products, the most important of which is our IFRS 16 approved energy performance contracts allows us to guarantee savings, not at the risk of eEnergy's balance sheet. It is a Redaptive risk profile. We're starting to see interesting deal flow coming from Red active, working closely on a weekly basis with the senior management team and building out a really interesting strategy for the next 5 years. For GB Energy DFP framework when was a fantastic I guess, endorsement of our platform and the confidence we've got to deliver multisite projects. We're live on this project now. We've delivered over 70 construction grade specifications, live on site. We've completed a number of projects, and we're moving in line with the program, and we expect to be completed in the next 3 months. So that will be a fantastic stepping up point for future multisite government projects and we're busy negotiating more projects across both the NHS and the education sector. An area we've talked about in the past is the development of our technology. For the last 10 years, we've been building both annually and also through process origination that's culminated in an app. Now that's had several hundred thousand pounds invested in it by the company that has really streamlined our assessment through to investment-grade proposal. It enables us to achieve a 10x return for single engineers that work for us in the business that would have previously involved 2 or 3 other departments. It's a system in a box. It's driven by machine learning and AI-based technology extremely accurate and allows us to provide customers with real-time proposals without them having to wait, and I'll talk a little bit about that in a second. And then finally, the bedding in of our senior C-suite has enabled me to focus on strategic growth in corporate development and partnerships, which is starting to pay returns now significantly, and that we now really run the day-to-day operations. I'm very pleased with the consistency we've seen in their leadership of their teams. A quick snapshot of our pipeline. We look at our pipeline in 2 parts. We have a big number, which is our total engagement pipeline of customers. The GBP 127 million that we referenced in the update earlier, which is about 1/3 of our pipeline is the investment grade part of the pipeline, that is projects that have gone through a full investment of specification, design and delivery to decision makers that are in the closing phase. The remainder of the pipeline is at either the origination engagement and/or, if you like, relationship building phase. The moment we move into investment-grade proposals, we've invested usually 3 to 4 months worth of on-site, structural design and delivery of quite significant data to the customer, and we see over a 50% conversion of that pipeline any depending on the size of the length of the sales cycle. We've got strong momentum into this year. The healthiest pipeline we've seen a clean sales force, a new sales force that we've integrated from scratch following the sale of the energy management business 2 years ago and now starting to be fully integrated with our finance platforms as well. We talked about frameworks, an incredibly important part. We're looking to build on it over the next 6 months. We've got 2 other frameworks we're in to onboard and these are now transcending across multiple sectors, but also for multiple technologies, and we think this is going to underpin a quite predictable growth as we move forward. Just a quick screenshot of how the app works in practice. As you can see, it captures both on-site data as well as meter data, allows you to navigate buildings in real time data and processed real time and then produce which is unique in the market. It removes 5 steps from the process and it removes most manual work and less time in the environment. So you can see it allows our individual layers, we managed 100% increase in volume, and we've much passed out to our customer is important as we start to generate any big opportunities. I'll just hand it over to John and to just some of the financial highlights, and then I'll come back and talk about the outlook.

Good morning, everybody. So we closed the year with GBP 23 million worth of revenue. We had expected the revenue for 2025 to be around GBP 4 million higher. As Harvey has already mentioned, some of the sales opportunities didn't close as expected in December and shifted into FY '26. So they haven't gone away. They're still there for us to pursue. On the 15th of December, when we put the trading update out, we said that the forward order book was GBP 10.5 million. As we sit here today, the forward order book is around GBP 14 million. So it's obviously increased by GBP 3.5 million over the course of the last month or so. GBP 14 million represents a doubling of the order book that we enter 2025, which is only GBP 7 million. So the -- it positions us very strongly for 2026. Adjusted EBITDA increased significantly, 0.6% for last year -- prior year and GBP 1.7 million in 2025. We really got a grip of our sort of PLC and nonoperating costs, which will reduce from GBP 2.5 million down to GBP 2 million and sort of optimizing our cost structure and try to secure operating efficiencies across the business. It has made a significant difference. And as we grow in 2026, that operational leverage will really come through in improved profitability. It's interesting to see gross margin improve. We've put a lot of work into budgeting jobs properly to make sure that all costs are correctly captured. I sign off every single quote that goes out of the door and make sure that -- we try to make sure that we we've captured all the costs, so there are no surprises later on. We've improved our ways of working with vendors. We've got some simple ways of working around sort of no deal, no go. So if you haven't got a purchase order from the don't do the work, and that's been very helpful in limiting gross margin leakage where vendors have taken on extra tasks that haven't been budgeted or properly costed. So despite the fact that Mace was actually a slightly lower margin contract for us compared to our normal sort of run rate of profitability, we still managed to improve the margin up to 35.3% versus 34.7%. So I'm really, really pleased with that performance. Net debt, including the IFRS 16 liabilities reduced to GBP 1.6 million, down from GBP 2.4 million previously. We continue to pay down the SPVs, the special purpose vehicle funding. And that's what is driving that the net debt cash number downwards primarily and it stated net debt is stated after we drew down GBP 1.5 million from Harwood Holdco Limited. This has helped fund net working capital on the Mace transaction and Mace effectively have doubled in size, but when we originally took it on to where we are today. As we did in the first half of 2025, there are no other exceptionals reported as exceptional items other than the share-based payment charge companies like to stick costs through the exceptional line. We didn't do that last year. We stopped doing that, and we haven't done it. We didn't do it in the first half of last year. We didn't do it in the full year results either. There are some minor restructuring costs of probably just under GBP 100,000. They are included within adjusted EBITDA. So effectively, the only add back to adjusted EBITDA is effectively the share-based payment charge, which is a noncash charge for share options. Cash at the end of the year had reduced. It was down to GBP 0.9 million compared to GBP 2.3 million previously, but that is expected to significantly increase in the first half of this year. The principal reason why cash had reduced as we've been working for 3 or 4 months on the Mace contract. And it's only now at the end of January, are we seeing cash really sort of coming in from that contract. So we had a significant investment in short-term working capital which is now unwinding and turning into cash, which is really good news. So as I've mentioned before, we've got a record contracted and awarded forward order book was currently sitting on GBP 14 million, and there's lots of other opportunities that we're close to closing, which will help boost the revenue for H1. We're looking at sort of a run rate of sort of GBP 10 million a quarter, which is where we want to get to. The Redaptive funding utility, just to make you clear, this isn't a facilities that we draw on. This is a facility that our customers draw on. So Redaptive facility of GBP 100 million available. As we sit here today, Redaptive provided funding to our customers of around GBP 13 million covering 175 projects across 179 locations. It's a terrific off-balance sheet IFRS 16 compliant facility. It's unique. It's a really helpful funding facility for our customers, which allows them to avoid the upfront capital cost when they're installing our technologies. We still retained the GBP 40 million net base facility, mainly for public sector contracts is still in place but we haven't drawn on it as yet. We're still up there, and we could do so if we wish to do so. In November 2025, we drew down GBP 1.5 million as an unsecured loan from Harwood, as I mentioned. This is the working capital on Mace. We started on the Mace project back in September. Effectively we've had 3 or 4 months of working on the Mace project, and we're now only seeing that working capital turning into cash. So in a couple of months' time, our cash balance will be several million pounds higher than it currently is -- currently was at the end of 2025. In the second half of last year, we replaced PKF, our previous auditors with Cooper Parry, to pay based in London, very experienced. And after I signed off the accounts for 2025 with an unqualified audit opinion with a true and fair view. But unfortunately, PKF didn't share the same view. And as a result, we decided to rebase with Cooper Parry. Cooper Parry has already done an extensive amount of work on the first 8 months trading results for the year. So they looked at the opening balance sheet for FY '25 and the accounts will be produced much, much more quickly this year, I'm sure than last year. We're not waiting until the 30th of June to try but they count out we will hopefully publish the account sometime in around April time and sooner if we can. The auditors are on site on the second of February. So we're just about to start and the work they've done already has validated the contract accounting work, which we've been doing which is really good news. I'm expecting that the 2025 result will be unqualified, so we'll get back to a normal sort of true and fair view of the financial performance of the group. That concludes the finance action. Thank you.

Thank you, John. Just a few operational highlights for the year. I think as I mentioned, the I guess the improvement and the stabilization of our C-suite with 2 Chief Operating Officers has really helped deliver a huge number of efficiency gains and scalability across both efficiency and also renewables. The ability for us now to tender for large multisite contracts really does complement our direct sales business so that we can run both in parallel. The portfolio NEEF funded NHS trusts, again, a new revenue line for us, mainly LED lighting at the moment, but with future solar and battery projects being added. The O&M business that we've launched is starting to be a really interesting high gross margin opportunity, and we think that's going to be scale this year. And over the next 3 years, we're hoping to triple that order book so we can start to see really meaningful annual recurring revenue streams coming through. Winning the laser framework was fantastic. It's the relationship we've been building on. They're one of the leaders, if not the leader in energy management procurement and now over 2,500 customers. So we see that framework opportunity worth over GBP 50 million for the next 4 years and a really big win for West Berkshire Council came in, in December. So these big wins have really underpinned a huge number of growth opportunities for '26 and '27 because a lot of this work is now coming to life as a result of 2 years' worth of planning and strategic implementation. So I'm very pleased with how the operations team and the development team have effectively manage their successes. I think overall, what we've seen in the last 12 months is evidence that of our strategy working. And despite the frustration of seeing GBP 4 million signed too late, it did signed. It came too late for us to recognize all of that. So unfortunately, we did fall short of our revenue performance, which was something I was quite disappointed in. But I think the outlook for FY '26 has never been stronger, which is the reason why we upgraded our guidance to GBP 34 million revenue, which is a 13% increase and an adjusted EBITDA to GBP 4.5 million. So the fact we've upgraded our guidance demonstrates the content we have in our business this year. We've never seen more opportunity. We've got a very stable team running data operations and we've got strongest visibility we've ever had. As John has mentioned, we've got very high visibility on cash with a strong unwind from the net working capital from the Mace building in the first quarter, and that's showing a really ongoing theme of strong financial control of course and good cash flow inflation coming through from our projects. We've definitely got a differentiated EPC solution now. We've got a product unique in the market. And I'm very pleased with that the way in which our renewables business has moved to be a multichannel renewables business, not just roof mount, but also ground mount and solar carport solutions which are complex projects and allows us to bid and tender for projects that previously we've not been able to do. I think Nick joining the Board has really strengthened our overall, I guess, team at the Board level. I'm looking forward to working with him as he helps improve governance and execution capacity. And that concludes our presentation today. Hope that's been useful for investors.

Perfect. Harvey, John, if I may just jump back in there. Thank you very much indeed for your presentation this morning. [Operator Instructions]. But just while the team take a few moments to review those questions submitted already. I just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A could all be accessed via your invested dashboards. [Operator Instructions]. But Katie, at this stage, if I may hand over to you to share the Q&A with the team. And if I pick up from you at the end, that would be great.

There's been a couple of questions looking at the outlook and opportunity. So firstly, where do you see the greatest opportunities in full year '26?

I think there's probably 3 big channels that we expect to scale this year. One is new multisite opportunities coming through from tenders that we've already delivered specifications for. We've got a number of NHS projects that we think is going to significantly drive performance. And I would say the C&I solar space for landlords. For me, they are the 3 areas that I think are going to drive the potential for exponential growth. As I've said and as John has mentioned, the ambition for this year is to do GBP 10 million a quarter. That's obviously significantly higher than our current guidance. And yes, of course, some things that never go quite according to plan, but we do believe that this business is well positioned to deliver GBP 10 million a quarter now. And that's really what our ambition is for the year.

And then looking a bit further on, what do you or eEnergy kind of aspire for the next 5 years or so?

I think there's a 5-year strategy, one has to think about batteries as being one of the core pillars of our revenue growth strategy. It's going to significantly change the landscape for renewables as people with daytime consumption looking to drive optimization of their solar solutions into in consumption. And I think that for us, the schools and for the NHS is going to be a really big growth driver. So I would say battery storage is a 5-year plan, which we start to see already the key driver for long-term growth. Any other questions for us to address?

Apologies. Your microphone is a little bit of Harvey, if you want to unmute it. We've got one question which we did answer, which is about the releasing of the full year reports and accounts. And John, you highlighted that was in April expected time, but specific date will be published close to the time. And then a final question we have is currently, how repeatable are large awards like the Mace contract? Should we think that this is a one-off or a step change or a new baseline for project sizes?